The prospect of saving for retirement is a daunting task, but the earlier you formulate your long-term financial plan, the more likely you are to leave this industry with retirement assets. After all, living without a financial plan is like setting sail without charting a course.
Crew in their first to third year of yachting are novice crew. These individuals hold predominantly entry-level jobs and earn salaries typically between $24K to $40K. The most important financial goals for this phase of your career are learning to control your financial burn rate, beginning a lifelong habit of setting a budget for yourself and learning not to spend more than you earn. Your first priority is to aggressively eliminate expensive debt like credit cards and car payments. Pay off high-interest debts before you start saving or investing. Your next goal is to establish an emergency fund to ensure that you do not wind up back in debt if you change jobs. Your emergency fund should be equal to at least two months’ salary.
Crew in their third to fifth year of yachting are considered experienced crew, and depending on their skills and licenses, they will be earning a slightly to significantly higher salary. As your salary increases, it is important to readdress your budget. If you have not eliminated your expensive debt, continue working towards that as your top priority. If you are debt-free, then keep it that way. You should increase your emergency fund to the equivalent to three to six month’s salary so you do not risk a debt scenario if you have to change jobs. If your employer provides benefits that include a pension plan with a contribution match, you should start putting as much money as you can into this fund; the match is free money. Otherwise open a personal pension plan, or if a U.S. citizen, a Roth IRA.
Crew in their fifth to 10th year are considered professional crew. Continuing professional development translates to salaries in the range from $50K to an excess of six figures. If you are on track with your retirement strategy, all of your expensive debts should be gone. You should be aggressively saving for retirement. Assuming you are still many years away from retirement and you have started to accrue significant savings, at some point during this phase of your career it is advisable to start making strategic investments like purchasing shares of stocks or real estate. Resist the temptation to leverage your investments or take on big risks hoping to expedite growth. Instead focus on making smart choices with minimal risk.
Those who have been crew longer than 10 years are considered career crew. If you have been disciplined, your portfolio should be at or approaching six figures. Continue to diversify your investments between real estate and the market. You should have a source of professional advice. As you approach the point in your career when you are considering retirement, it is time to liquidate high-risk investments for more secure sources of income. Some options you will want to discuss with your financial advisor are dividend funds, annuities, bonds and CDs. Your strategy needs to be based on your particular plans for retirement.
Saving for retirement should be a career goal. Investing is inherently risky, and it is imperative to research and affirm financial advice before sinking your hard-earned money into any investment. Long before you invest, educate yourself. Know where your money is going, and know your risk threshold. The sooner you become disciplined about your spending and saving habits, the sooner you will have the financial freedom to consider retiring.
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